Planning Your Retirement? You’d Better Plan Again

Last week personal finance guru Suze Orman warned viewers of her CNBC show they should start rethinking their vision of “the American dream.” Specifically, she said, our expectations for early and comfortable retirements likely won’t be met if the government stays on the same financial track it’s currently on.

In other words, plan to work longer.

Orman’s concern is backed up by simple demographics and fairly consistent bipartisan financial projections. The first Baby Boomers, 25 percent of our total population, turn 65 this year. Between 3.5 and 4.2 million Americans will turn 65 each year until 2029. The problem is that Medicare is expected to run out of money in 2017 or 2018, and Social Security will start to pay out more than it takes in around 2016 (although it won’t be technically broke until 2047).

If you’re factoring in government benefits as part of your post-retirement financial plan, you’d do well to run the numbers again, operating under the assumption that Uncle Sam simply won’t be there for you, Orman contends. In many cases, that means your retirement plan won’t let you retire.

Unless, of course, you can’t find work. Last week, Computerworld reported that during the recession, unemployment rates for older IT workers increased faster than they did for younger employees.

To me, all these facts and figures suggest that anyone over the age of 40 working in IT needs to formulate a strategy of self sufficiency for the ugly point when things may start to come undone. That doesn’t just mean a Suze Orman-style eight-month cash emergency fund and a fat Roth IRA. It means finding a way to make money on your own, for as long as you can.

We’ve already seen what seems to be an irreversible trend toward increased contract work as opposed to full-time positions – and why not? Companies love to avoid paying benefits if they can. It’s well worth taking an hour, a day, or a week to go through the mental exercise of puzzling out how you’d continue on your own, well into your 60s if you had. Could you go back to former employers and offer yourself as a consultant? Could you avoid a layoff by offering to work half-time? How would you plan to stay current on technology if you were consulting on your own? And where would you find new clients? Or do you plan to be financially secure enough to say goodbye to IT and launch your dream career as a baker or orchid grower?

Most of us don’t contemplate the trajectory of our careers beyond our next tax return. But in a world full of financial and technological upheaval, it’s critical to take the long view and plot a path that gets you through the tumult and shields you from the systemic ageism you may encounter.